Robot Tax? Perhaps, a Robot Policy first

 Microsoft founder Bill Gates made a sensational argument, to levy a tax on robots that replace human workers, in an interview with Quartz a month ago. The primary premise of a “robot tax”, in line with debates in EU parliament, was to recoup the loss of original tax revenue for the state that would have come from the human worker if and when he/she had not been replaced by the robot. The tax was to help fund state programs to retrain the workforce to better equip them for jobs that require newer skills and the ability to work with machines that augment human productivity. The rationale for such a tax was also to slow down the pace of automation to give sufficient time to the system to organize the financial support and retraining to the displaced workers (Delaney, 2017). It is hard to support the argument with the contention that just like previous innovations like mechanization, electrification and computerization, this wave of digital innovation will also lead to unprecedented economic prosperity with net gain in total jobs, despite the job displacements that a substantial portion of the workforce will have to endure.

 Bill Gates anticipates major labor and economic dislocation in the next 20 years as robots and various other artificial intelligence applications replace many tasks that humans are presently paid to carry out. The nature of day-to-day work is expected to change in a majority of occupations. The dislocations from changes in labor demand can lead to public outrage forcing kneejerk legislations.

 Factory workers, drivers, and cashiers, whose jobs are destined to obsolescence, will need to be retrained and transitioned to traditional or emerging jobs in fields like health services and education where human involvement is still vital. While retraining and reskilling are expensive and time-consuming processes, the current pace of automation is fast and furious. Gates feels that the onerous task of workforce realignment shouldn’t be left to the market alone. He suggests state involvement is necessary to put freed up labor to better use in public sector fairly quickly, without which the public resistance to automation will lead to social disruption and loss of enthusiasm for innovation. Hence, Gates’ argument for a tax to prevent any kind of neo-Luddite public outcry for regulations that will restrain innovations from further prospering (Morris, 2017). 

 Various research studies on digitization have been pointing out an impending major socio-economic dislocation from the loss of jobs as digital technologies eliminate, automate or augment various human tasks. It is indeed true that industrialization since the end of the 18th century has exposed the labor market to wild transitions and churns. During the industrial upsurge during the 18th and 19th century, the loss of manual jobs from mechanical automation led to the creation of many other new jobs. Industrial revolution liberated the limits and dependence of human muscle power with mechanical and electric power, and migrated workers to jobs that depended more on one’s cognitive and emotional skills (Manyika et al., 2015). During the two centuries of industrialization, economic prosperity from falling prices and higher demand created many times more jobs than what were lost. However, the recent job dislocation from globalization has shown big strains, due to market saturation and insufficient price decline. The political resurgence of protectionism and parochialism in many developed countries can be attributed to the state’s failure in handling the strains of labor dislocation. If the emerging labor churn from digital automation is not fairly managed and adapted through institutional training programs, there will be a heavy socio-political price to pay. That is the scenario that Gates is anticipating and weighing in to avert. However, I do question the propriety and need of a specific new tax for that purpose.

 While Gates’ argument is well-thought out, and probably, well-intended to wake up and alert the policy makers, it should be pointed out that mechanization of the 18th century, electrification of the 19th century and computerization of the 20th century have all only actually increased the net employment. Even the more recent globalization phenomenon has added to the net total number of jobs even in the developed countries than what was lost, even though clearly there were some winners and some losers in the process. My contention is that the digitization of the 21st century will also create more jobs than it will destroy. Gates is right about the need to prepare the state to fund and adapt its institutions to equip workers with relevant skills to help them navigate the period of job transition. But it is questionable whether there is a need for a specific new tax to fund such an effort and slow down the momentum of the automation path on which we currently are . Hence, I posit that productivity gains, cost savings, demand, growth, and overall positive impact on the economy from digital automation will help market and state to together drive and align workforce reorganization. I base my opposition to Gates’ argument for a “robot tax” on the merit of the thesis itself, its idealistic overtures, and its potential to decelerate and reverse the digital innovation, as explained below.

 The first major replacement of human workers was in the 18th century textile industry that led to a resistance movement called Luddism. If the Luddites had succeeded in lobbying the English government to enforce a tax on weaving machines, how would it have affected the whole Industrial Revolution and the progress to the humanity that we enjoy today? Similar resistance has occurred during the computerization and globalization in the late 20th century too. The information age, dawning with computers and internet, has opened humanity far and wide to new opportunities and avenues for success with a truly universal scope and impact. The digital revolution of the 21st century shouldn’t be stalled with hurdles such as a tax. Rather, it should be promoted and facilitated through open data platforms for innovations that can augment human minds. To help produce the new talent with the latest skills, the state and markets should invest in and promote a culture of continuous learning programs. Neo-Luddism is not the answer to potential labor dislocation and reskilling, rather what’s needed is a sound plan to help navigate the workforce that gets affected (Wilson, 2017).

 What is so fascinating is that the argument for a “robot tax” comes from the individual who presided over one of the world’s largest software companies with heavy investment in leading the artificial intelligence platforms and technology wave. The moral philosophy of altruism to put the needs of others above one’s own is indeed behind the justification to force businesses that are using robots to create more wealth to sacrifice part of their profit to pay a tax. In a market economy, wealth creation through innovation which may lead to inequality is an acceptable phenomenon because the market will trigger self-correction when it gets lopsided. Inequality is what drives further innovation and competitiveness that ultimately lead to overall prosperity. Hence, it is argued that no hurdles be erected to slow down or impede innovations that can create human prosperity (Woiceshyn, 2017).

Unlike the past industrial revolutions around mechanical power, electric power, and computing power, the present digital revolution through big data and artificial intelligence is eco-friendly and non-polluting, and can even negate some of the harms caused to the nature by the previous revolutions. It can utilize green-IT technologies in producing special purpose computing devices for the robots and such artificial intelligence devices and applications. It should also be noted that the robotic applications are also more relevant to government transforming its operations for faster and efficient public service in more transparent, cost-effective, and creative ways. Hence, it is certainly wiser to promote, and not deter, a more sustainable and transparent innovation in its infancy.

 Digital and artificial intelligence technologies are indeed reshaping the way businesses and governments operate, fueling economic growth. However, the stresses and dislocations the technologies have unleashed on the workers who are affected by the elimination or automation of the tasks they have been handling are huge. There is no argument about the need for the market, the state, and the society to collectively adapt and navigate through this transition. Negative impacts of globalization and market consolidations that led to political upheaval for protectionism and isolationism shouldn’t be ignored. However, as history tells us, despite a number of innovations that have been short-sighted, technology innovations mostly have produced better quality of life and more opportunities. Retraining and reskilling to take up newly emerging job responsibilities and adapt to working with augmenting machines and devices are just a necessity to survive in the digital economy. Instead of resisting the change, it is smarter to adapt and work with the change.

 The jobs that were lost in the past from mechanization and globalization were at the lower salary and skill levels, except in the case of some high paying union jobs. However, the jobs challenged by digitization are across the board from pilots and radiologists to taxi drivers and pharmacists. Many of these are such high paying jobs that the replacement jobs you may obtain through retraining and reskilling cannot fetch similar levels of income. Automation has the potential to create more inequality. Gates argued for a government role to limit the inequality adverse distribution of wealth. In this case, new ideas such as universal basic income should be explored as many countries have started evaluating.

 Before we create a new form of tax, we should evaluate the tax shelter programs that permit big corporations to avoid paying fair taxes to the countries where they should do so. Corporations try to avoid paying taxes in the developed economies where they enjoy the quality of business and life benefits and utilize the consumer base for most revenues in order to maximize the profits. Many corporations incorporate in countries that are poorer and less powerful than the companies themselves to be able to dictate their terms. It makes more sense to build an international consensus on ways to collect the corporate taxes that goes uncollected. In a world of online transactions, enforcing a law of taxing in the country where you make the money from can easily be implemented using the very same artificial intelligence and robotic tools a “robot tax” is trying to resist. 

 While the idea of a “robot tax” is discussed as a way to weather the automation and digitization storm, it shouldn’t be ignored how difficult will it be to enforce. It is even difficult to reach a consensus definition for the term artificial intelligence. Didn’t washing machine in our homes take away jobs? Doesn’t the spell checker in our word processor take away jobs? Is robot always a hardware device? Are they not special purpose computing systems? Instead of opening a new complex tax mechanism, it is better to enforce a fairer and simpler corporate tax system based on how much business profit is made where. If businesses make higher profits through automation, that should bring in more tax revenue to the state as well. The state advancing a public policy that promotes sustainable innovations through automations and facilitates retraining reskilling of workforce to equip them for the digital age will help create a win-win situation for the market and the citizens. Hence, I argue for a sound “robot policy” instead of a “robot tax!” If Gates’ goal was to initiate a debate and generate awareness on the topic, he has indeed achieved it, and that itself is highly commendable.

References

Delaney, K. J. 2017. “The robot that takes your jobs should pay taxes, says Bill Gates.” Quartz.com, February 17, 2017.

Manyika, J., Ramaswamy, S., Khanna, S., Sarrazin, H., Pinkus, G., Sethupathy, G., and Yaffe, A. 2015. “Digital America: A Tale of the Haves and Have-Mores.” McKinsey Global Institute Annual Report, 2015.

Morris, D. Z. 2017. “Bill Gates Says Robots Should be Taxed like Humans.” Artificial Intelligence, February 18, 2017.

Wilson, J. 2017. “Bill Gates’ Idea To Tax Robots That Replace Human Workers Is Neo-Luddism.” Taxes, February 20, 2017.

Woiceshyn, J. 2017. “No Robot Tax: Bill Gates and Justin Trudeau’s Misguided Inequality Crusade.”, Capitalism Magazine, February 22, 2017.